GENERAL ARTICLES

How’s Your Credit?

Are you "good pay" or "bad pay"? Good or bad, the facts are sure to be recorded in the doomsday books of the credit agencies—One company has 14,000,000 names on its lists in Canada and the U.S.

ARTHUR LOWE April 1 1939
GENERAL ARTICLES

How’s Your Credit?

Are you "good pay" or "bad pay"? Good or bad, the facts are sure to be recorded in the doomsday books of the credit agencies—One company has 14,000,000 names on its lists in Canada and the U.S.

ARTHUR LOWE April 1 1939

How’s Your Credit?

Are you "good pay" or "bad pay"? Good or bad, the facts are sure to be recorded in the doomsday books of the credit agencies—One company has 14,000,000 names on its lists in Canada and the U.S.

ARTHUR LOWE

FILES, acres and acres of files—that’s what impresses one visually about a credit investigation bureau. There are other things too, such as the miraculous machines upon which girls write all day—without so much as leaving a mark. And reporters raising a babel of sound as they talk endlessly into dictaphones. But the files are the things which really stagger the imagination, partly because of their number, but mostly, as their purpose becomes known, because of the magic they suggest. A little frightening, this magic.

“Here,” said Mr. Suydam of Toronto Credits, Ltd.— and we’ll explain who Mr. Suydam is in just a minute— “is a telegram from Dallas, Texas, asking for the credit rating of Mrs. Nottex, who once lived in Toronto. They’ll have it before very long.”

No magic about that, I thought. Mrs. Nottex had undoubtedly given Toronto Credits, Ltd., as a reference.

But that wasn’t the case at all, it turned out. At that very moment Mrs. Nottex was probably standing in the Dallas store, looking over the bedroom suite she proposed buying, all unconscious that her credit was being looked up in the Book of Judgment. And before she left the storeeverything being well, of course—she w'ould leave, mildly proud that an honest face had stood her in good stead again.

A Continental Network

"DROADLY speaking, there are three kinds of credit: consumer credit, commercial credit, and what for want of a better name must be called insurance credit. Mrs. Nottex was using consumer credit w'hen she applied to the store in Dallas in order to buy a suite of furniture on extended terms. It is just possible that her husband had moved to Dallas to engage in business for himself, in which caseif he wanted to buy goods on the customary trade terms of payment thirty days after delivery—he would need to use commercial credit, and his rating would be supplied by a firm specializing in reports on all business enterprises. Insurance credit has chiefly to do with life insurance, and it became a matter for investigation, as will be explained later, because of a somewhat gruesome traffic in corpses.

The investigation of consumer credit is the concern of fifty credit bureaus in Canada and 1,400 in the United States all of which are linked together so that credit information regarding people who may move from one town to another can be exchanged. But to return to Mr. Suydam.

J. H. Suydam is manager of Toronto Credits, Ltd., an organization which can supply credit ratings on 350,000 people in the Toronto trading area. Toronto Credits is owned co-operatively by various stores, and is typical of the fifty similar bureaus dotted across the Dominion. These agencies are affiliated through the Associated Credit Bureaus of Canada, and nearly all are members of an American affiliation.

The purpose of a consumer credit bureau is to protect merchants against people who are poor risks, by the pooling of information regarding credit customers. A member, upon joining, is requested to furnish a complete list of his accounts, giving as much identifying data as possible, such as the full name of the husband, the given name of the wife, occupation, address and so on. These names and particulars form the raw material of the files.

Before visiting Mr. Suydam I had expected that the atmosphere of a credit bureau would be as dignified and aloof as a credit manager’s smile. I had expected, upon opening the door, to be met by an enormous silence and to see men in eye shades poring over ledgers. Instead, when the door opened, a blast of sound struck me in the facea sound made up of jumbled voices, ringing telephone bells and madly clattering typewriters. And there were no men in eye shades poring over ledgers—there were just girls and girls, apparently playing an aimless game of hide-and-seek amid the bastions of files.

It was quiet in Mr. Suydam’s office, however, and as he talked I began, bit by bit, to understand what was happening in that hectic place outside. He told me about the development of consumer credit. Somewhere about 1910 there began a tremendous increase in the purchase of goods by deferred payment, and this movement reached its peak in 1929. To keep pace with this expansion, merchants recognized the necessity for efficient clearinghouses of information. Toronto was one of the last big cities on the continent to establish a bureau, and it is significant that since its establishment in 1927 Toronto merchants have reduced their annual write-off for bad debts from nearly three to less than one per cent—in some lines of business to less than one-half of one per cent.

How System Operates

CO FAR. so good. Our bureau is established, and we A' have on file the names and addresses of approximately all people who have ever been granted credit in the community. In addition to their own names, the dockets bear the names of the firms with which they have accounts.

Obviously it would be impracticable to keep up to date in the bureau the payments made by the 350,000 customers of over 350 firms, so a system is employed which makes information available on any account as it is needed. The system operates like this:

John Quackenbush wants to buy a radio on credit, so he selects his model at Blank and Company’s and fills out the customary conditional sales agreement. Blank and Company put through an enquiry to the Credit Bureau, and one of the hide-and-seek girls makes for the Q files. Out comes the Quackenbush docket—Quackenbush Carpenter Evangeline.

For quick and positive identification the dockets are made out with, first, the credit account holder’s name, then his occupation, then his wife’s Christian name. In this case there is no doubt that it is the same Quackenbush and with various companies he has several accounts which were in fairly good shape when last reported.

Calls are put through to the firms listed, and they report the amounts owing and overdue. Mr. Quackenbush, it seems, is pretty well up to date with his payments, and this information is relayed to the credit manager of Blank and Companybut in such a way that the credit manager does not know the other firms with whom Mr. Quackenbush has accounts. He is told their lines of business, however.

With past performances of a satisfactory nature, as in the case of Mr. Quackenbush, a credit manager has no hesitation in opening an account. Neither has he any hesitation in refusing an account to a man at the other extreme who has established an unsatisfactory record over a period of years. But between these two come the borderline cases. The credit bureau simply reports the facts, and it is up to the credit manager of the firm concerned to decide each case on its individual merits.

The credit bureaus work on a meter system, and the member firms, who pay only a small membership fee, are charged for each report they receive. In Toronto a report such as I have described would cost fifty cents; in a smaller city it would probably be less. Various charges are made for written reports when file information does not adequately cover a particular case.

A detailed report, known as a standard questionnaire, is very detailed indeed and gives the answers to thirtyfour questions regarding the applicant for credit. It tells, for example, whether he is suspected of trafficking in liquor or narcotics, whether he moves often, how he is regarded as to character, habits and morals, and what sort of reputation his friends bear. If he has been overbuying, that is duly recorded along with any notable demonstration of thrift. The questionnaire ends with a confidential note that the information is not to be divulged, under any circumstances, to the person to whom it refers—a provision, when you think of it, which is not at all surprising.

The standard questionnaire is used when fairly large amounts are involved, or when there is no credit information available regarding the applicant, and a single report of this type costs the member firm one dollar. The person referred to in the report is not consulted as to its contents; this is developed from information in the files and from enquiries made by special investigators employed by the bureau.

How Fraud is Prevented

\ ƒ ER Y few cases of deliberate fraud come to the V attention of the investigators, but there are people who attempt to cut extremely sharp corners. It would be fraudulent, of course, to obtain credit under a false name —but this doesn’t deter hopeful applicants with unsatisfactory records from trying a little discreet camouflage. Take, if you will, the case of Murdoch Maclnnes.

Murdoch dropped into a Toronto store and ordered a houseful of furniture, in anticipation, he explained, of his forthcoming marriage. He was not listed on anybody’s tx>oks, so he became the subject of a standard questionnaire, and his employer, a manufacturer of automobile parts, supplied the information that Murdoch had been in his employ for eighteen months. Previously, said the employer—revealing a little matter which Murdoch had skipped — he had worked for an engineering firm in Vancouver.

A query was sent through to the credit bureau in Vancouver, and back came a report that although no Murdoch Maclnnes was listed, a certain Meredith Mclnnes had disappeared, leaving behind him a number of “forgotten” accounts. Meredith, it seemed, had also been an engineer, but he was married —and his wife’s given name was shown on the docket as Helen.

Investigation revealed that Murdoch’s bride-to-be was Helen, too—a coincidence which clinched a suspicion in the investigator’s mind that Meredith and Murdoch were one and the same.

In due course Mr. Maclnnes received a letter asking him to call and see the credit manager of the firm from whom he had ordered the furniture. He called, and, realizing the jig was up, confessed everything. His real name, he admitted, was Meredith Murdoch Mclnnes. He was married and his wife, who had been staying with her people

in Winnipeg, was due to join him in a few days. He had conceived the idea of changing his name slightly because he had feared that he might be traced from Vancouver -and for the same reason he had pretended to be unmarried.

The story has a happy sequel. Mr. Mclnnes paid up his back debts and now', under his right name, which is neither Meredith nor Murdoch, he is listed in the files as “satisfactory.”

There was a day when employers showed a nice reticence about the people working for them, but employers nowadays can generally be counted upon to supply information bearing upon the credit of their employees. The standard questionnaire contains a space for the employer's opinion of the credit applicant, and —on the big-ileas-have-little-fleas principle—there’s a space for the investigator to give his opinion on the standing and reputation of the employer.

“Character and Capacity”

'"THE chartered banks, as well as the personal loan companies, obtain reports from the credit bureaus before granting unsecured loans to individuals. In making personal loans, bankers are not moved by an altruistic desire to relieve the worries of a debt-bedevilled public; they have simply found a means of extending their business safely by using the machinery of credit investigation. In spite of the fact that a personal loan needs no second endorsement on the note and no collateral, it is backed by

the most priceless security of allan unblemished reputation plus the ability to pay.

The borrower benefits, too, as a result of credit investigation, for the chartered banks are able, as a result of the information available to them, to make unsecured loans at reasonable rates. The banks, of course, contribute their quota of information to the credit bureau, and there is a space provided on the questionnaire for “bank experience.”

“Do you and the other credit investigators miss anybody at all?” I asked Mr. Suydam.

“Not many,” he said.

In the Toronto bureau, he explained, most people within trading distance of the city were listed, for most of them, at one time or another, had secured credit from a member firm. Similarly, the fifty bureaus dotted across the country served not only the cities and towns in which they were located, but large rural areas too. In small trading centres and in isolated rural districts there w'ere still merchants w’ho gave credit based upon their personal knowledge of the applicant, but the tendency, even in small towns, was to pool information. In the United States, he said, bureaus were found to work satisfactorily in communities with a population of 10,000 and even less.

The large hotels make limited use of the credit bureaus, but generally speaking the very nature of their business precludes careful investigation of credit risks. The extension of credit by a hotel is not a common practice as in the retail trade; it is simply a courtesy extended to guests at the discretion of the credit manager. Usually the type of credit a guest wants is to get his cheque cashed in a hurry—

which means, more often than not. that the credit manager must make a quick decision, based upon intuition and a look at the applicant's credentials.

From time to time, of course, the credit manager will meet a man whose cheques are an expression of hope rather than a promise to i>ay; and from time to time, too, he meets the downright crook who sets out delil>erately to “beat” the hotel. He is given some protection against such people by the National Hotel Protective Association an American organization which sends out bulletins describing the gentlemen who attempt to victimize hotels, with particulars of their rackets.

The man who sets out deliberately to defraud a hotel invariably uses a name other than his own, so that, even if there were time, he could not be checked through the credit bureaus. Invariably, too, a crook is well provided with credentials.

J. G. Smeaton-Wilkinson registered at a Toronto hotel, and after he had been there a few' days he dropped in on the credit manager and tendered his business card, which bore, beautifully engraved, the name of one of the best known companies on the continent.

Said Mr. Smeaton-Wilkinson, with a nice touch of embarrassment: “I’m in a bit of a hole. My expense

cheque hasn’t arrived and I need some change. I wonder ii you could fix me up with ten dollars?”

It was a very natural sort of request, and the credit manager had no hesitation whatever in advancing Mr

Smeaton-Wilkinson the money and debiting it to his bill. Two days later - beaming and self-assured Mr. SmeatonWilkinson visited the credit manager’s office again. He had his firm’s cheque with him this timefor $250 - and the letter which had supix>sedly accompanied it.

“Here we are,” he said. “Came this morning! D’you mind okaying it for me?”

The credit manager thrown off guard by the clever build-up gave his okay, and a few hours later Mr. Smeaton-Wilkinson left the hotel, never to return. The cheque came back, though and even supposing that Mr. Smeaton-Wilkinson paid cash to the printer for his stationery and cheque forms, he still got away with a nice profit.

“The type of credit given by hotels does not come within the sphere of consumer credit, as we understand it,” Mr. Suydam explained. “We are not particularly interested in a man’s capital, or the amount of money he may have in the bank. The credit managers of retail firms are interested mainly in character and capacity. What we supply is evidence of a man’s will to pay as shown by past performance. Capacity, of course, is governed by income.”

Bad Debts Reduced

VITE LEFT the austere serenity of Mr. Suydam’s office * ’ and walked into the filing department—to see the system working. The girls, who had seemed to be playing an aimless game of hide-and-seek, now proved to be filing clerks, endlessly searching out dockets.

Continued on page 24

Continued from page 17—Starts on page 16

Beyond the banks of files was a peculiar steel table divided down the centre by a barrier, two feet high and several inches wide, glass panelled on both sides. Coming out of slots on the top of the barrier, with the speed and manner of ticker tape, were six-inch widths of paper. Girls w'ere seated along the tw'o sides of the table, writing, with apparent pointlessness, on its polished steel surface.

“It’s a telautograph,” Mr. Suydam j explained. “What the girls write will be ! reproduced in certain stores having similar i machines installed. When those stores send through queries to us they come through on these strips ...”

He pointed to the oversize ticker tape,

! and inside the glass panels I saw, then, j the joggling pencils, remotely controlled, asking interminable questions about the good, the fair, and the unsatisfactory.

1 he main purpose of a credit bureau is to supply information to its members— but in addition each credit bureau has its owm collection department and machinery for tracing “lost” debtors. In making collections the credit bureau is in a peculiarly strong position, for although a debtor may not mind his credit being poor with one particular firm, he doesn’t relish the prospect of having poor credit all around.

A lost debtor, like a bad penny, is never really lost. Sooner or later he bobs up somewhere to ask for credit—and when he does there’s a Deputy Recording Angel to look up his sins of omission in the files.

The credit bureaus have lowered consumer costs by cutting down bad debtsthere isn’t a doubt about that. In a recent survey in the United States, it was found that the bad-debt losses among merchants who were not members of a credit bureau were from 100 to 400 per cent greater— varying according to different lines of business—than the losses of those who made use of a bureau’s services.

It occurred to me that those engaged in credit investigation must perforce regard their fellow men suspiciously, and I made this suggestion to Mr. Suydam.

He disagreed. “Take this last ten years,” he said. “The amazing thing has not been the losses suffered, but the payments made. Out of decreased and decreasing income, people met their payments, little by little. It was the honest, ordinary man who saved the day.”

The ordinary man saved the day because his payments enabled the retailer to meet his obligations, and commercial credit, without which our economy could not function, was prevented from crumbling. Commercial credit, although dependent upon the soundness of consumer credit, is in a sense its older brother, and investigation in this field has long been an established practice. Investigation goes deeper than in the consumer field, for reports must take into account Capital as well as Character and Capacity—the three C’s of credit.

Commercial Credit

nrilE reporting of commercial credit throughout the world is largely in the hands of a private company which has become almost a public institution. The company, as you will have guessed if you are in any way connected w'ith business, is Dun and Bradstreet.

R. G. Dun and Company started in business in the United States in 1841. and a Canadian branch was opened in 1857. In 1933 an amalgamation was effected with the house of Bradstreet. At the present time the company reports upon 180,000 businesses in Canada, 67,000 of which are in Ontario.

The organization required for the operation of a commercial credit reporting company is much more complex than that needed for a consumer credit bureau. Introduction of the third C—capital—conjures up a whole new' set of complications,

for it is patently impossible to judge the amount of a man’s capital by the way he pays his bills. Sometimes it happens that a businessman’s own conception of his own capital is extremely nebulous, so how then can an outside company be expected to report on it with reasonable accuracy?

In order to find out, I went to see j. C. Ilodge, Canadian manager of Dun and Bradstreet, whose peculiar position at the very hub of Canadian business has made him an authority on commercial questions. He s[X)ke to me of business trends, and he told me of the spacious days when it w'as not unusual for a wholesale house to extend a year’s credit to its customers. From that he swung into credit today and, like Mr. Suydam, he expressed his faith in human nature. Businessmen, he said, were honest—not a little bit honest but pretty nearly one hundred per cent so.

“Eighty-five per cent of our reports,” he declared, “are positive and favorable. Of the remaining fifteen per cent, only a negligible proportion are unfavorable because the firms in question don’t play straight.”

Patiently he explained how Dun and Bradstreet secure the reports which have made them famous, and how they are able to publish a reference book, brought up to date four times a year, covering virtually every business in Canada. This reference book, which goes to all subscribers to Dun and Bradstreet’s service, gives the financial strength, within limits, of each firm reported upon, as well as a rating of the firm’s general credit.

As far as commercial reports are concerned, Dun and Bradstreet operate in much the same way as a consumer credit bureau. When a client sends in for information on the Q.T. Hat Shoppe, for example, all pertinent material on file regarding that concern is immediately dispatched. If the material is not of recent date, printed forms are immediately sent to the wholesalers listed as supplying the shoppe with goods, asking for information. The wholesale house is asked the highest credit granted to Q.T. in a year, together with the amount at present owed, the amount past due, and whether Q.T. is prompt or slow in the payment of bills. Slow is subdivided into plain “slow” and “slow but satisfactory.” Eighty-five per cent of these forms, on the average, are returned duly filled out. On the basis of the new' information a follow-up report is sent to the enquiring firm, and the new material is entered in the Q.T. docket.

The basic difference between the two systems of credit information lies in the method in which the source material is obtained concerning the firms and persons reported upon. The consumer credit bureau relies upon the ledger accounts of its members, but the commercial credit organization—although it relies upon the wholesalers to supply current information —must list and give salient facts concerning every known business in the country, whether it is the corner grocery or a big department store.

To begin with, then, there must be compiled a directory of all businesses. This original compilation was made in Canada in 1864, and it has been brought up to date periodically ever since. Once a year printed forms are sent to the firms listed in this reference book, which they are requested to fill out. When filled out, such a form shows the capital structure of the firm concerned, its assets, liabilities, book debts and so on. Similar statements are sent to new firms starting in business, and seventy-five per cent of them are returned giving the desired information.

That is the beginning—but it is only the beginning. Gathering information to supplement and check the statements, there is an army of reporters.

Continued on page 27

Continued from page 24

“We’ll go through to the office.” said Mr. Hodge. “You can see for yourself.”

Credit Reporters

rT"'HE office was only vaguely reminiscent of that other office at the consumer credit bureau. What impressed one here was the noise of voices—droning on and indistinguishably jumbled.

“The reporters,” said Mr. Hodge as he hustled me by.

There seemed to be dozens of them, seated at their desks, talking into dictaphones. They were reporting upon calls made during the day, and they had that peculiar detachment of seasoned dictaphonists which enables them to go right on talking, oblivious to the mighty welling up of talk about them.

The notes dictated by the reporters are typed out by girls in the stenographic department, who use a special ribbon which enables them to make what are known as “master copies.” By a special hot-press process, twenty prints can be secured from such an original. The master copy itself is filed in the appropriate docket, and when enquiries are received about the particular firm it concerns, the necessary number of prints are run off.

The reporters are usually university men who have specialized in either economics or commerce. Like salesmen they move about the country on regular itineraries, and they visit, at least twice a year, even the tiniest villages where there are business firms. On no account is a reporter allowed to sell the company’s service; he must keep strictly to his job and not trespass upon the preserves of the sales department.

Naturally reporters are astute and gifted in the power of quick appraisal, but they are in no sense sleuths out to gather damaging information about the firms they visit. Their approach is direct. They present their cards and ask straightforwardly for the information wanted. If it is forthcoming, well and good; if not they use their best judgment, and whatever knowledge they can secure from other sources, in preparing a financial and credit picture of the firm concerned.

A report, turned in by a field man, may deal, perhaps, with a small restaurant. It will give the owner’s name, his nationality and his experience as a restaurateur. It will tell whether he owns the property and, if not, on what terms he rents it. There will be further information about capital, taxes, fire insurance and so on. The whole will form a pretty accurate picture of the business—sufficient to allow a wholesaler to judge the amount of credit he can reasonably allow.

Many businesses are extremely complex, and it is here that the reporter’s judgment and training come into play. He must be able to unravel complicated balance sheets, and to know when the stock on hand is dangerously high, or when the book debts are out of proportion to the working capital. He must be able to think in figures—reading them as easily as the rest of us read text.

Practice, and the constant comparison of one business with another, enables him to do this. An overhigh inventory in a hardware store, let us say, will affect him much as a sour note affects a musician. He sees the trouble in his mind, before his figurings have revealed, perhaps, the shakiness of the whole business structure involved.

Most businessmen are glad to discuss their problems frankly with the reporters, recognizing that they will receive expert and disinterested advice. The material the reporters collect is not only made available for the company’s clients, but when collated and analyzed, it is also used in the preparation of retail business surveys.

The operation of a commercial credit office is a triumph in systematized efficiency. When an enquiry is received, it creates a reflex action in the nervous system of the agency, and things begin to

happen almost of their own volition. That is not only true of an enquiry, but it is also true of trade news, which develop and must be distributed quickly to any clients who would be affected by it. The news, which may concern a judgment, a liquidation, or some matter of equal importance from a credit standpoint, is automatically sent to all subscribers who have enquired about the firm involved during a i^eriod of two years.

Mr. Hodge made it all seem very simple —except one thing. New businesses are being started every day, and it seemed impossible that the reporters could keep check on them all.

“That’s easy,” said Mr. Hodge. “We know when a new business starts, almost before the man who is starting it. He is almost sure to contact a wholesale house—■ and then, naturally, an enquiry comes through to us.”

What does credit investigation cost? It is, of course, big business. The service starts with a basic rate of approximately $200, which entitles the subscriber to the four reference books and the right to make 100 enquiries within the year. The cost rises according to the number of reports desired, and runs as high, in Canada, as $25,000.

Insurance Investigation

1AST, but most amazing to the layman, 4 in the investigation of credit, is that carried out for the insurance companies. It is amazing because the company which supplies the protective service is like a beneficent OGPU with agents in every town and hamlet in Canada, the United States, Cuba and Hawaii.

But let us begin at the beginning. From the very inception of life insurance the companies found it necessary to secure “Friends’ Reports.” Originally these were made out by friends of the applicant in lieu of a medical examination. Even after the medical examination became established as a regular process of underwriting, the Friends’ Reports were continued as a form of character reference.

In the ’90’s many insurance companies on this continent were made the victims of insurance frauds. The method used by the conspirators was extremely simple. They would take out a policy for one of their number, who would disappear after the first premium had been paid. The conspirators would then rob a new grave, secure a corpse, and duly identify the deceased as the person ujxrn whom the policy had been taken. There were variations of this general scheme, hut all of them hinged u]xm switching identities before or after death, and the companies were mulcted for millions. It became obvious that the only way to combat the swindle would be to secure a report on every applicant considerably more searching than that normally contributed by a “friend.”

It so happened that in 1889 Cator Wool ford had started the Retail Credit Company in Atlanta, Georgia, chiefly for the purpose of providing credit reports for the merchants of that city. He undertook insurance reporting as a side line, but he soon saw that by extending his local institution into a national company he might secure all the reporting business of the insurance companies throughout Canada and the United States. The vision was quickly translated into reality, and the Retail Credit Company forthwith became exclusively an insurance inspection service. It remains so today.

The Canadian division of the company, with head offices in Toronto, is supervised by J. A. Richards. From him I learned the meaning of insurance credit, and something too about the great army of investigators scattered throughout the country. The company’s concern today is primarily with life insurance, just as it was forty years ago. Reports are made, however, covering the credit—which in the insurance field means chiefly character of applicants for all types of insurance. In

the United States and Canada fourteen millions of these reports are on file.

“But our problem,” said Mr. Richards, “is not so much to have [People docketed in the files, but to be able to get quickly, at any time, a current report on anyone. In order to do this we must have inspectors— investigators if you like—and lots of them.”

“And who are these inspectors?” I asked.

He smiled. “It would be easier to tell you who they are not . . . We find that people of strong convictions do not make good inspectors—people, that is, such as preachers and teachers. Politicians are not good because they have prejudices. Bankers have a tendency to bear down heavily on the fellow who gets a hit behind. Postmasters are out of line because they think that if they know a person’s face they know most everything else about him.

“In a small town a town, say, with a population up to 1,500 we find that a merchant is the best source of information, and we try to get the biggest man in town. If possible we choose a man who is over forty-five with a good financial rating

for that is an indication of personal responsibility. A general store merchant is best because he usually knows the surrounding countryside.”

In towns of from 1,500 to 4,000 population the Retail Credit Company, Mr. Richards said, chooses an up-and-coming lawyer f»r its agent—one, preferably, without a large practice. Political lawyers are left strictly out of the picture, however —presumably because you couldn’t trust a Grit to report quite dispassionately upon a Tory. In towns up to 15,000 population the company tries to secure two young lawyers in partnership, so that one of them is always available. In towns over 15,000 population the company maintains a direct reporting station, sometimes in the charge of a lawyer accepting resixmsibility for all the company’s work in the area, but more often staffed by salaried men. In addition to the intensive organization maintained on this continent, the company has representatives and correspondents scattered throughout the world.

"We have between ten and fifteen thousand representatives in Canada alone,” Mr. Richards said.

The company receives a fee for its reports, and the representatives who work on a part-time basis are also paid by fee. A lawyer, operating in a town over 4.000 population, may earn as high as $75 a month.

Foiling a Plot

IN MAKING a report for life insurance, the investigator definitely identifies the applicant and tells how long he has known him. He also states whether the age given is apparently correct. With these routine matters out of the wav, there comes the question of the applicant’s credit. What is his financial worth and income? If the applicant is well known to the inspector personally, this information is from personal knowledge; in other cases it is based ujxm estimates given by people who are considered in the best position to know.

In addition to these prosaic matters, the inspector is asked to report on the applicant’s appearance and habits—this last with particular reference to alcohol. Finally, there is a euphemistically phrased question asking whether the applicant is known to have any heavy debts, domestic difficulties, or personal feuds which might affect him as a life insurance risk.

I wondered, aloud, if the agents served a real purpose. It was all very well talking about this vast army, but did the army justify its existence?

“Miss Mason,” said Mr. Richards, “get me the file on the Buffalo-Niagara Falls conspiracy.”

Miss Mason brought the file—so here’s the story, reconstructed from the records.

Mr. X, a representative of the Retail Credit Company, dropped into a Chinese café in Niagara Falls. Ontario, for a cup of coffee. In the booth opposite him he

recognized the agent for an industrial insurance company, and another man about whom he had recently made a favorable life insurance report. It was the recollection of that favorable report which made Mr. X sit up and take notice—for the man now was very drunk, indeed, and, according to the information secured for the rejxirt. lie was not addicted to heavy drinking.

"Mind if I join you?” Mr. X said with a nod to the agent.

The agent didn’t mind at all. and Mr. X eased himself into a seat alongside the drunk. The drunk was half asleep, but lie perked up enough to say hello to the newcomer—and to curse the insurance man.

“What’s the trouble?” Mr. X asked.

“He’s higher’n a kite," the insurance man explained. “He wanted a drink, so I took him along to a pal of mine-and look at the mess he’s in. A guy who can’t hold his liquor shouldn’t touch it at all.”

Looking at the insurance man, whom he knew only slightly, Mr. X decided that he didn’t like him n*t a little bit. He noticed, for the first time, the man s cold expressionless eyes and the mocking twist to his liiis when he sjxike. That quickburgeoning disWke gave Mr. X an inspiration which saved, perhaps, a dozen lives.

Ile ixïrsuaded the agent to take him to “a little place” which turned out t« be a bootlegging dive, and from certain things he saw and heard. Mr. X began to suspect the existence of a conspiracy to defraud the company which the agent represented. He reported his suspicions to head office and further investigation instituted. It was discovered that the agent, working in conjunction with a doctor and a lawyer, had specialized in insuring people, who, because of ill-health and addiction to alcohol, were unsatisfactory risks—which was made possible by the fact that an industrial company does not demand a medical examination. Once such a person was insured, the conspirators contrived to have him sign notes to the lawyer—who thus became an indirect beneficiary. The rest of the scheme consisted simply of feeding the insured jx;rson unlimited quantities of raw alcohol, thus hastening death. Actually the conspirators succeeded in getting rid of only one man in this way, but as a result of the investigation, policies to the value of between two and three million dollars were cancelled.

The insurance agent suspected that the plot had been discovered and became panicky. Some time previously he h„d insured an uncle in Lockport for $3,000 and now, being in urgent need of money, he hired a gangster to shoot the uncle -apparently hoping that he would be able to collect before the investigation became too hot. It proved a false hope, for he was promptly arrested and indicted for murder. Hoping to save his own skin, he gave the name of the man who did the actual shooting and both were convicted. Thus, the activities of this ring in the insurance field were checked for all time.

The Disabled Greek

DISABILITY clauses, now a popular life insurance feature, sometimes encourage the unscrupulous to match their wits against the companies, ©ccasionally, in collusion with a crooked doctor, an insured person will succeed in collecting for imaginary disability—but with fifteen thousand investigators scattered throughout the country, it doesn’t happen often.

Mr. Richards told me of a Greek who succeeded for a little while in collecting $200 a month for nothing but it was an unusual case. And he was found out in the end.

The Greek came to Canada just after the War. and in the course of a few years built up a considerable fortune. He took out a large insurance policy with a disability clause, and then, at the beginning of the d^ç>ressi*n. he returned to Greece

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Continued from page 28 and invested his fortune in a vineyard. It proved a bad investment, the price of grapes slumped to almost nothing, and his fortune began to dwindle alarmingly. It was then he remembered the insurance policy'.

In the fullness of time the head office of the insurance company in Toronto received a claim for $200 a month total disability—the hopeless state of the applicant’s health being duly attested by a platoon of Greek doctors. The company began to pay, but as a matter of routine the case was referred to the Retail Credit Company.

A representative of the Retail Credit Company in Salonika received a cable, and started forthwith on a visit to the insured. I íe travelled by train and mule, and came at last to the vineyard, where he was

greeted by the proprietor—a genial, husky rogue engaged in carrying 200pound baskets of grapes on his back to the wine press.

The investigator, with commendable tact, acted the part of a tourist and spent a pleasant afternoon taking movies— much to the delight of his host. Mine host’s delight turned slightly sour, however, when the next mail from Canada arrived— for his short appearance in the movies cost him exactlv $200 a month for life.

There is no doubt that careful selection of risks has cut the cost of insurance to the public—just as the investigation of credit risks has saved the honest man from paying the bills of the fraudulent. Although most of us will feel a certain regret at the passing of our private lives, we, the public, are the ones who gain.